Network effects, homogeneous goods and international currency choice: New evidence on oil markets from an older era

Barry Eichengreen, Livia Chiu and Arnaud Mehl
Authors registered in the RePEc Author Service: Livia Chitu

Canadian Journal of Economics, 2016, vol. 49, issue 1, 173-206

Abstract: Conventional wisdom has it that network effects are strong in markets for homogenous goods, leading to the dominance of one settlement currency in such markets. The dominance of the US dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multipolar system in the period ahead is not impossible.

JEL-codes: F30 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Journal Article: Network effects, homogeneous goods and international currency choice: New evidence on oil markets from an older era (2016)
Working Paper: Network effects, homogeneous goods and international currency choice: new evidence on oil markets from an older era (2014)
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